Today’s News Synopsis:

Capital One Home Loans has chosen not to foreclose on any California mortgages. The government applauded TALF for netting $600 million in income. According to S&P, lenders need 13 months on average to foreclose in a judicial state. Altos Research claims home prices decreased 2% in February.

In The News:

“Senior Obama administration officials, newly joined by state attorneys general, were on the brink Thursday of finalizing major elements of a possible settlement with large U.S. banks accused of flawed and fraudulent foreclosure practices, sources familiar with the discussions said.”

“Pending home sales nationwide are down for the second consecutive month, except for in the South where sales rose 1.4% between the months of December and January, according to a new report from Standard & Poor’s.”

“Home prices fell another 2% in February with declines in all 27 markets tracked by Altos Research. The company said prices are slowly improving and housing inventory is up 3.75% nationwide as the market moves into a much-anticipated spring selling season.”

“Overall payroll employment in February grew by 192,000, following a revised 63,000 rise in January and a 152,000 gain in December. The February advance came in marginally lower than the updated consensus forecast for a 200,000 gain”

Looking Back:

One year ago, Bruce Norris claimed the government’s aid would not be enough to prevent the U.S. economy from sliding back into recession. The NAR reported that national pending home sales decreased by 7.6 percent in January. Commercial real estate delinquencies decreased in February. The delinquency rate for Fannie Mae loans increased to 5.38% in February.

Today’s News Synopsis:

The NAR reports pending home sales increased 10.4% in October. According to RealtyTrac, foreclosure sales decreased 25% in the 3rd quarter. Statistics from the Labor Department show jobless claims rose 6.3% last week. Greg Lippmann of LibreMax Capital predicts national home prices will drop another 10%.

In The News:

“The Pending Home Sales Index,* a forward-looking indicator, rose 10.4 percent to 89.3 based on contracts signed in October from 80.9 in September. The index remains 20.5 percent below a surge to a cyclical peak of 112.4 in October 2009, which was the highest level since May 2006 when it hit 112.6.”

“Freddie Mac said Thursday that the average rate for 30-year fixed loans rose to 4.46 percent from 4.40 percent last week. Three weeks ago, the rate hit 4.17 percent, the lowest level on records dating back to 1971.”

“Irvine-based RealtyTrac, a company that publishes listings of foreclosed properties online, said in a report Wednesday that sales of U.S. properties in some stage of foreclosure dropped 25% in the third quarter from the previous quarter and 31% from the third quarter of 2009.”

“Initial jobless claims rose 6.3% last week to 436,000 after coming in at the lowest level in two years the prior week. The Labor Department said the seasonally adjusted figure of actual initial claims for the week ended Nov. 27 increased by 26,000 from the previous week’s figure of 410,000, which was revised slightly upward.”

“Banks churned out more than $1 trillion of CDOs. They often created them at the request of investors who made bets against the deals. Some banks made their own bearish bets. Such bets paid off when the mortgage market crashed, though financial firms also suffered steep losses from CDOs stuck on their books.”

“banks have years to comply with key elements in the rules. For instance, a bank must hold a minimum Tier 1 capital ratio of 4.5% by 2013 and 6% by 2015. A bank’s minimum capital conservation buffer – a fund the bank can draw on in times of economic stress – must reach 0.625% by 2016 and 2.5% by Jan. 1, 2019.”

“U.S. home prices will drop an additional 10 percent, according to Greg Lippmann, a founder of hedge fund LibreMax Capital LLC and former Deutsche Bank AG trader who gained fame for his bets against subprime-mortgage securities.”

Looking Back:

One year ago, the MBA’s weekly survey showed that mortgage applications increased by 2.1 percent from the previous week. Trepp reported that overall delinquency rates for commercial mortgage-backed securities increased to 5.65 percent. According to ADP Employer Services, 169,000 jobs were cut in one month.

Today’s News Synopsis:

The Obama administration announced a new program for homeowners in foreclosure. The Fed bought a total $8.26bn of MBS from Fannie Mae, Freddie Mac, and Ginnie Mae. Freddie Mac reports the 30-year FRM rate increased to 4.99 percent this week.

In The News:

“The Obama administration on Friday announced broad new initiatives to help troubled homeowners, potentially refinancing millions of them into fresh government-backed mortgages with lower payments. Another element of the program is meant to temporarily reduce the payments of borrowers who are unemployed. Additionally, the government will encourage lenders to write down the value of loans held by borrowers in modification programs to make their mortgages more affordable.”

“In a speech on the Federal Reserve exit strategy to the House of Representatives Committee on Financial Services, chairman Ben Bernanke noted that the government-led credit provision, the Term Asset-Backed Securities Loan Facility (TALF) is reaching its end this month. The exception to this deadline, however is newly issued commercial mortgage-backed securities (CMBS), and loans backed by newly issued CMBS. These will get an extra three months.”

“Under the terms of the voluntary program, lenders will be required to write down at least 10% of the mortgage principal for borrowers who are current on their payments. The program is open to borrowers whose mortgage isn’t currently insured by the FHA. The principal reduction must bring the new FHA loan to value (LTV) to 97.75% and make the new payments account for 31% of the borrower’s monthly income. The program also offers incentives to lenders who offer borrowers with second lien mortgages similar principal reduction and refinance options. The maximum allowed LTV of the combined loans is 115%.”

“Alan Greenspan disputed suggestions by his former central bank colleague and current San Francisco Federal Reserve Bank President Janet Yellen that the Fed could have headed off the housing bubble by raising interest rates.”

“In an odd leap, long-term Treasury yields blew up, and Wednesday was the worst single day in nine months. The 10-year Treasury note stopped at 3.88 percent, a level touched for the fifth time since last June, but the violence of this move threatens upward breakout. Meanwhile, mortgages held fairly well, inside the 5.25 percent top that has held since August. The peculiar part: Big sell-offs like this are driven by good economic news, but that’s not what we got. February sales of new and existing homes fell (new ones at the lowest pace since stats began in 1963, 303,000 annualized), and unsold inventory rose.”

“Unlicensed contractors can underbid their licensed counterparts because they often don’t pay worker’s compensation. That, according to the board, means homeowners could be liable if there is an accident. There are also fewer options for homeowners who get stuck with shoddy work.”

“Freddie Mac (NYSE:FRE) today released the results of its Primary Mortgage Market Survey (PMMS) in which the 30-year fixed-rate mortgage (FRM) averaged 4.99 percent with an average 0.6 point for the week ending March 25, 2010, up slightly from last week when it averaged 4.96 percent. Last year at this time, the 30-year FRM averaged 4.85 percent.”

Looking Back:

One year ago, the 30-year FRM rate was at 4.85 percent. The number of pulled housing permits decreased by 50 percent from 2008 to 2009. The U.S. economy shrank 6.3 percent during the 4th quarter of 2008.

Today’s News Synopsis:

The CBIA report shows that September sales for new-home communities have decreased by 11 percent from 2008. Foreclosure activity increased by 5 percent from August to September. According to Trulia, nearly 26 percent of homes were decreased in price from the previous month, and the total value of those price reductions is $28.1 billion.

In The News:

“The monthly CBIA/Hanley Wood Market Intelligence (HWMI) New-Home Sales and Pricing Report showed that sales in new-home communities of 10 units or more were 11 percent below September 2008, an improvement from the 13 percent year-over-year decline last month and the much higher declines in previous months. During September, 2,310 new homes and condominiums were sold in the subdivisions tracked by Costa Mesa-based HWMI, compared to 2,580 in September 2008. Sales of single-family homes were down by 17 percent, while sales of townhomes and ‘plexes’ – duplexes, triplexes, etc. – were down 11 percent and sales of condominiums were 12 percent higher than a year ago.”

“September’s total was up 5% from August and 90% from a year ago. The chart (click for larger image) shows outstanding auction notices going back to January 2007. Auction notices, also known as notices of trustee’s sale, are a warning that a property will be offered for sale, usually at a local courthouse.”

“The U.S. median sale price for an existing single-family home was $177,900, an 11.2% drop from the same period a year earlier, according to the National Assn. of Realtors in Washington. Distressed sales continued to weigh on prices despite a popular tax credit fueling the volume of deals. Still, the median was higher than in the second quarter of this year, when it was $174,200.”

“Industry reports indicate a number of firms are gearing up to sell the first round of debt under the Fed’s CMBS TALF program for new issuance. The firms include Developers Diversified Realty Corp. (DDR: 9.02 +5.99%), which in October said it obtained new first mortgage financing of $400m from Goldman Sachs Commercial Mortgage Capital, an affiliate of Goldman Sachs & Co.”

“the firm sees ‘temporary’ stabilization of house prices, as 7.5m units or 13.5% of US homeowners are in non-payment status. Amherst previously explained its reasoning for calculating 7m of those are ‘destined’ to liquidate, which hangs a shadow of distressed inventory over the positive signs seen in the US housing market.”

“MBA’s refinance index increased 14.5% from the previous week. The association’s purchase index decreased 1.8%. Refinance applications took a 66.1% share of all applications, up from 62.3% in the previous week. The adjustable-rate mortgage (ARM) share of all applications decreased to 6.1% from 6.9%.”

“The average discount was 10 percent, little changed from a month earlier, the San Francisco-based real estate data provider said today. Almost 26 percent of homes for sale were reduced at least once. Luxury properties — those costing $2 million or more — accounted for 25 percent of the dollar value of reductions and less than 2 percent of listings, Trulia said. ”

“Real estate franchisor and brokerage Realogy Corp. said it turned a $58 million profit in the third quarter, thanks in part to a debt restructuring that allowed the company to claim a $75 million gain and stay in compliance with agreements governing nearly $3 billion in loans.”

“A major real estate brokerage company merger gives GMAC Real Estate a new name while expanding the Real Living real estate brand and growing the U.S. operations of Canada-based Brookfield Residential Property Services. The merger of GMAC Real Estate and Real Living, which will operate under the Real Living name and under parent company Brookfield, represents the second sizable U.S. expansion of Brookfield operations in the past two years.”

Gov. Arnold Schwarzenegger signed SB 94, which prevents prohibits any person from collecting an advance fee from a consumer for loan modification. According to Campbell Surveys, the national average home price rose 6% from August to September. MetroStudy anticipates a total of 562,000 housing starts in 2009.

“The FHA has expanded from guaranteeing just 2% of mortgages to over 20% in just a couple of years, dramatically raising its exposure to the still declining US housing market. The FHA still backs toxic, almost-no-money down mortgages. It will currently guarantee mortgages with as low as 3.5% downpayments.”

“California has joined nearly two dozen other states in prohibiting foreclosure rescue companies from collecting advance fees for helping homeowners negotiate mortgage loan modifications. Gov. Arnold Schwarzenegger on Oct. 11 signed into law a bill, SB 94, that prohibits any person from demanding or collecting an advance fee from a consumer for loan modification or mortgage loan forbearance services.”

“The administration said the new program would help to support low mortgage rates and expand resources for low and middle income borrowers who want to buy or rent a home. The program will feature two parts – a new bond purchase program to support new lending by housing finance agencies and a temporary credit and liquidity program to improve access by housing agencies to credit sources for their existing bonds.”

“The October 21 Term Asset-Backed Securities Loan Facility (TALF) for commercial mortgage-backed securities (CMBS) will likely see an increase in subscription volume over last month, BarCap said in a research report Friday. Bid list activity of $4.8bn since the last CMBS-eligible TALF subscription date points to a likely increase in subscription volume over last month. Of this activity, $2.6bn — or 55% — is TALF-eligible, BarCap researchers said.”

“National average home prices rose 6% from August to September, driven by an increase in real estate owned (REO) sales prices and transaction counts, according to a monthly real estate market survey conducted by Campbell Surveys. Increased demand REO property increased in September. The average price of distressed REO property was $124,500 in September, up from $106,700 in August. Combined with move-in ready REO, distressed properties accounted for 31% of purchase transactions during the month”

“While housing start projections for 2009 are down 37.9% from the same period of 2008, research firm Metrostudy expects steady increases in construction starts next year. Metrostudy expects a total 562,000 housing starts for 2009, down 37.9% from 2008. That includes 438,000 single-family starts, which are down 30% from 622,000 in 2008.”

“Federally backed mortgages account for 59% of new home sales transactions with 96.5% to 100% loan-to-value (LTV) so far in 2009, according to the latest John Burns Real Estate Consulting homebuilder survey.”

“Only three years ago, foreclosure was rarely a factor in how people became homeless. But among the homeless people that social service agencies have helped over the last year, an average of 10 percent lost homes to foreclosure, according to ‘Foreclosure to Homelessness 2009,’ a survey produced by the National Coalition for the Homeless and six other advocacy groups.”

“About 10 percent of all mortgages in this country are scheduled to adjust in the next few years, with the numbers peaking in mid- to late 2011, according to First American CoreLogic. Those loans are worth about $1 trillion, and nearly 20 percent of the borrowers who have them are already seriously behind on their monthly payments.”

“San Joaquin brings the FDIC’s tally of failed banks in 2009 to just one away from the 100-mark. But the single collapse last week follows no bank closures the week prior – the first time that has happened since the week of June 8th. So, does the lull in the FDIC’s closure announcements mean the pace of bank failures is subsiding? Not likely.”

“Riverside, part of the thickly populated area known as the Inland Empire east of Los Angeles, has become synonymous with all the worst lending and spending practices of a property boom that busted and pushed the world’s No. 1 economy into its longest slump since the 1930s.”

“Bruce Norris, president of property investment firm The Norris Group, said inventory levels are ‘completely artificial, completely baloney … The delinquency rate (in California) has exploded, but inventory levels have gone down. In many of these cases the banks have simply avoided foreclosure.’”

“According to Rick Sharga, senior vice president of RealtyTrac, there is a shadow inventory of 400,000 to 500,000 homes taken back by the banks but not yet processed for market sale. ‘Those properties are sitting on the sidelines and God forbid the banks decide one day to flood the market with them – that won’t happen – but they’re there and we’re going to have to get through them,’ Sharga said at a September real estate event hosted by The Norris Group.”

“Thornberg cited real estate as a case in point. While home sales are up in some areas of the country, 6 to 7 percent of home mortgages nationally are 60 to 90 days delinquent. In California alone, 250,000 mortgages are 60 to 90 days late. And there’s more economic trouble on the horizon, he said, with rising unemployment and additional waves of foreclosures.”

Today’s News Synopsis:

President of John Burns Real Estate Consulting expects the commercial real estate market to do further damage to residential real estate. New legislation requires swap dealers and major swap participants to register with regulators and requires clearing organizations to provide transaction information to appropriate regulators. GE, MGIC, and Bank of America lost over 500 million in Q3 of 2009.

In The News:

“Bank of America (BAC: 17.26 -4.64%) lost $1bn or $0.26 per share during Q309, compared to a profit of $1.2bn during Q308. But company year-to-date income through Q309 was $6.5bn, compared with $5.8bn during the same period of 2008. BofA paid $1.2bn in preferred dividends for the quarter, including $893m in dividends to the US government”

“Researchers at Barclays Capital (BarCap) expect the October facility date for a government loan program to receive an uptick of requests over the last subscription date. The October 21 Term Asset-Backed Securities Loan Facility (TALF) for commercial mortgage-backed securities (CMBS) will likely see an increase in subscription volume over last month, BarCap said in a research report Friday”

“MGIC Investment Corp. (MTG: 6.42 -12.30%) posted a $517.8m net loss in Q309, compared to losses of $115.4m in Q308 and $184.6m in Q209. The net loss for the first nine months of 2009 was more than $1bn, compared to a net loss of $250m during the same period of 2008.”

“The pain felt in the distressed commercial real estate (CRE) sector will affect the residential mortgage industry on two fronts. The affects range from banks’ disposition of residential assets to a reluctance to lend to the residential sector at all, according to commentary Friday by John Burns Real Estate Consulting. The consulting firm indicated banks may need to dispose of residential assets to concentrate on commercial real estate distress as it continues to pressure the banks. This should have the affect of creating land-buying opportunities at low prices and sparking a bit of recovery, the firm said”

“The Mortgage Investors Coalition called on the Treasury Department to reject a proposal to offer distressed borrowers interest-only payments for a certain length of time as part of the terms of a Making Home Affordable Modification Program (HAMP) workout. The coalition said a proposal being formed by large banks to allow borrowers the option to make interest-only payments as part of a new HAMP workout plan fails to address the issue of negative equity. Such a proposal is not in the best interest of the housing industry and consumers, said the coalition, a recently formed trade group of asset managers holding more than $100bn in residential mortgage-backed securitizations (RMBS) on behalf of pension funds, college endowments and other investors.”

“The legislation passed Thursday requires swap dealers and major swap participants to register with regulators and requires clearing organizations to provide transaction information to appropriate regulators. The bill also provides for public disclosure of aggregate data on swap trading volumes and positions in a way that protects the business transactions and market positions of individuals”

“Revenue from General Electric’s (GE: 16.08 -4.23%) real estate division for the first nine months of 2009 declined 46% compared to 2008, the company said in its Q309 report. GE Capital Real Estate, which creates real estate debt and equity investment funds for institutional investors as well as finances commercial real estate transactions through commercial mortgages in North America, lost $538m in Q309, compared to profit of $244m in Q308. Year-to-date losses through Q309 were $948m.”

“Due to the modifications, overall loan delinquencies dropped as of Sept. 30, 2009, compared to peak levels. Loans 30 to 59 days delinquent fell to $70.6m, 55% lower than the $157.5m on January 31, 2009. Loans 60 or more days delinquent decreased to $16.8m, or 95% lower than the $431.3m on Feb. 28, 2009. Loans in foreclosure fell 38% to $281.8m from $456.2m on June 30, 2009.”